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Urban and safety-net hospitals will face difficult reimbursement challenges

Executive Vice President and Chief Financial Officer Rick Langfelder at Lutheran Medical Center, a 462-bed hospital located in Brooklyn, N.Y., spoke recently with Healthcare Finance News Associate Editor Kelsey Brimmer regarding the most pressing financial issues that many hospitals located in urban areas of the U.S. have been facing over the last few years and what is to come for them.

Q: What would you say are some of the top financial challenges for your hospital, as well as other hospitals in urban areas?

A: We rely on Medicaid and Medicare for 80 percent of our payments  -  50 percent is Medicaid and 30 percent is Medicare. The biggest problem that's looming is the fact that [the Centers for Medicare & Medicaid Services] is going to decrease Medicaid and Medicare Disproportionate Share Hospital (DSH) payments, which is a huge problem for us. Medicaid DSH payments were originally intended to serve those hospitals that serve a large number of medically indigent. We are a safety-net institute that serves a vulnerable medically-indigent population. We can't cost shift because we have a low commercial payer mix. Medicaid DSH payments also take into account the number of uninsured  -  this allowed safety nets to survive. 

I think the ACA does a lot of good things, like making sure a lot of people have insurance and companies can't have annual limits. However, the DSH cuts are projected to be dramatic and that will put safety nets in jeopardy.

Q: Any possible solutions to this reimbursement problem that you can think of?

A. For our hospital, I think this is the one biggest issue. For other issues, sometimes changes can be made to fix the problem, but we are who we are and we can't change our payer mix. We have a lot of low-income folks that need access to care. We tend to be a very proactive community hospital and we can't change who comes to us. This is why reducing DSH payments is so problematic to us. One thing politicians should realize is that they could reduce expenses by targeting DSH dollars to true safety nets. 

Q: If Medicaid and Medicare reimbursement cuts are your biggest issue, what are some other financial problems you've been facing?

A: I think the next one down is the whole push here to take risks, and create programs where patients must have better outcomes and fewer readmissions. The idea is great but doing that is very difficult. We have special programs for health issues, such as diabetes and asthma. The programs rely on patients following a diet and strict medication schedules, and it's more difficult for a family with little support or income to do these sorts of things when they're just struggling to make ends meet. It's much more difficult for safety nets to take this risk and have savings from many patients when there may be homelessness or substance abuse. It becomes difficult for us to change their behavior or lifestyles even though we are working on it. However, because it's something we can work on, we are doing that. It's a difficult hill for us to climb up.

Q: What are some areas of opportunities for urban and safety-net hospitals?

A: One opportunity is that hopefully through the awareness of primary care and increased access to healthcare, more patients come to their doctor or nurse  -  instead of the ED when it's often too late or much more expensive to treat. There are opportunities for us to see patients sooner and preventively, rather than later on when they are often very ill. Increased access is a good thing for the neighborhood and for the hospitals.